Singaporean economy expands slower by 2.2 pct y/y in Q4 2018; 2019 GDP forecast at 2.7 pct y/y

The Singaporean economy expanded by a slower 2.2 percent y/y (1.6 percent q/q saar) in Q4 2018, marking a modest slowdown from 2.3 percent y/y (3.5 percent q/q saar) in Q3 2018 but also the slowest y/y growth since 3Q16 (1.7 percent y/y). This was slightly below the Bloomberg consensus forecast for 2.5 percent y/y (3.6 percent q/q saar).

The manufacturing sector saw a pickup in momentum from 3.7 percent in 3Q18 to 5.5 percent y/y in 4Q18, but still shrank 8.7 percent q/q saar (which is the first annualised q/q drop in a year) which suggested that the softening global demand environment was starting to weigh into the year-end and the frontloading activities seen earlier to pre-empt the US-China tariffs were starting to fade as well.

Notably, the biomedical manufacturing and electronics clusters performed robustly and more than offset the precision engineering cluster’s weakness. Meanwhile, the services sector decelerated to 1.9 percent y/y, but remained supported largely by the finance & insurance, business services and infocomms sectors.

However, the construction sector remained the laggard and has been contracting since 3Q16 with the latest 4Q18 print at -2.2 percent y/y in 4Q18 amid weakness in public sector construction activities, albeit it expanded sequentially for the second quarter by 1.1 percent q/q saar. 

That said, private residential property prices fell for the first time in six quarters by 0.1 percent q/q in 4Q18, compared to +0.5 percent q/q in 3Q18, according to URA data, which suggested that the recent cooling measures are working. 

"Our 2019 GDP growth forecast is 2.7 percent y/y. Given the external economic environment remains fraught with uncertainties such as whether the 90-day truce for the US-China trade war will materialise into a more lasting deal, geopolitical tensions and lingering questions over China’s growth slowdown," OCBC Bank commented in its recent report.